Difference between pages "Conditional Sales Contracts and Security Agreements (11:VI)" and "Motor Dealer Act (11:VII)"

Revision as of 22:33, 28 September 2020

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 15, 2019.

A. Overview of the Motor Dealer Act

The Motor Dealer Act, RSBC 1996, c 316 [MDA] sets up a licensing regime that requires all motor dealers in the province be licensed. The Registrar of Motor Dealers carries out the licensing function. The Registrar has the authority to receive complaints concerning the conduct of a motor dealer and has the authority to refuse to provide a license, or suspend or terminate an existing motor dealer’s license.

The definition of a motor dealer is a person who, in the course of business:

(a) engages in the sale, exchange or other disposition of a motor vehicle, whether for that person's own account or for the account of another person, to another person for purposes that are primarily personal, family or household;
(b) holds himself, herself or itself out as engaging in the disposition of motor vehicles under paragraph (a); or
(c) solicits, offers, advertises or promotes with respect to the disposition of motor vehicles under paragraph (a),

but does not include a salesperson.

The MDA Regulations set out requirements concerning representations made by a motor dealer when offering motor vehicles for sale. A motor dealer is required to disclose to a prospective buyer whether the motor vehicle was previously used as a taxi, police or emergency vehicle, or for organized racing. In the case of a new motor vehicle, the motor dealer must disclose whether the vehicle has sustained damage that required repairs worth more than 20 percent of the asking price. In the case of a used vehicle, the dealer must disclose whether the vehicle has sustained damages requiring repairs of more than $2,000. The motor dealer is also required to disclose whether a vehicle has previously been used as a lease or rental vehicle and whether a used motor vehicle has been brought into the province specifically for the purposes of sale.

A motor dealer is required to disclose to a prospective consumer whether the odometer accurately reflects the true distance travelled by the motor vehicle. The MDA Regulations also set out the required contents of a sale or purchase agreement concerning new vehicles.

Section 34 of the MDA prohibits any person from disconnecting or tampering with an odometer. It is also an offence to drive or operate a motor vehicle with a disconnected odometer. Furthermore, it is an offence for any person to alter, disconnect, or replace a motor vehicle’s odometer with the intent to mislead a prospective purchaser about the distance travelled by the motor vehicle. Odometer tampering can significantly increase the apparent sale value of a motor vehicle and, therefore, the consumer should be wary of representations of low mileage. The MDA sets out regulatory responses to odometer tampering. The consumer who suffers loss as a result of odometer tampering has a contractual remedy and may be able to present a claim to the Motor Dealer Customer Compensation Fund Board.

B. Motor Dealer Customer Compensation Fund

An individual who suffers a loss as a result of purchasing a motor vehicle from a registered motor dealer may be entitled to compensation from the Motor Dealer Customer Compensation Fund Board (“the Board”). A consignor of a motor vehicle is also entitled to make an application – on similar grounds as a purchaser – for compensation for the loss of the consigned vehicle or the value of the vehicle. Individuals who have purchased a vehicle, primarily for personal or family use, from a registered motor dealer are eligible to apply to the Board for compensation. Before applying for compensation, the consumer must first make a demand against the motor dealer responsible for the loss. What constitutes an eligible loss is set out in s 5 of the Motor Dealer Customer Compensation Fund Regulation, BC Reg 102/95 [MDCCFR]. An eligible loss must be a liquidated amount arising from a trade-in, full payment, deposit or down payment or other liquidated amount in respect of the purchase of a motor vehicle. The cause of the loss must be related to the bankruptcy, insolvency, receivership, dishonest conduct, or failure of the motor dealer to provide clear title.

Under the Motor Dealer Customer Compensation Fund Regulation an eligible loss may also arise from the unexpired portion of an extended warranty so long as it results from the bankruptcy, insolvency, receivership, or other failure of the motor dealer. Claims that will not be compensated include those based upon cost, value or quality, those based on an extended warranty or service if it is recoverable from an insurer, and those related to the portion of the operation of the motor vehicle claimed as a business expense. For further information about making an application for compensation from the Motor Dealer Customer Compensation Fund, call the Vehicle Sales Authority at (604) 574-5050 or visit http://mvsabc.com/compliance-and-claims/compensation-fund/. A claim against the Fund must be made within two years from the refusal or the motor dealer’s failure to pay for the losses.

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 {{LSLAP Manual TOC|expanded = consumer}}
-The ''Personal Property Security Act'', RSBC 1996, c 359 [''PPSA''] governs conditional sales agreements and security contracts. It established  a new unified system for the registration, priority, and enforcement of transactions where collateral is given to secure payment or the  performance of an obligation. The main purpose of the ''PPSA'' is to offer lenders or creditors a system of priority vis-à-vis other creditors where it is necessary for the lender or seller to take an interest in personal property to ensure the obligations of the borrower or purchaser are met. The legislation effectively creates a system for the registration and enforcement of a security interest against personal property.
+== A. Overview of the Motor Dealer Act ==
-Under s 2, the ''PPSA'' governs every transaction that creates a security interest. A “security interest” is defined in s 1 as an interest in goods that secures payment or the performance of an obligation.
+The ''Motor Dealer Act'', RSBC 1996, c 316 [''MDA''] sets up a licensing regime that requires all motor dealers in the province be licensed. The Registrar of Motor Dealers carries out the licensing function. The Registrar has the authority to receive complaints concerning the conduct  of a motor dealer and has the authority to refuse to provide a license, or suspend or terminate an existing motor dealer’s license.
-Note: For the purposes of this section, goods is used to define security interests. However, the actual definition is broader than that. For more information, see ss 1(a) and ss 1(b) “security interest”.
+The definition of a motor dealer is a person who, in the course of business:
+*(a) engages in the sale, exchange or other disposition of a motor vehicle, whether for that person's own account or for the account of another person, to another person for purposes that are primarily personal, family or household;
+*(b) holds himself, herself or itself out as engaging in the disposition of motor vehicles under paragraph (a); or
+*(c) solicits, offers, advertises or promotes with respect to the disposition of motor vehicles under paragraph (a),
-[[Introduction to Creditors%27 Remedies (10:I) | Chapter 10: Creditors’ Remedies and Debtors’ Assistance]] has a discussion on the protection offered to a consumer by the ''PPSA'', including the requirements of enforceable security. The ''PPSA'' has some special considerations applicable if the goods in which the collateral was taken were consumer goods. Consumer goods are defined in s 1 as goods that are acquired primarily for personal, family, or household purposes.
+but '''does not''' include a salesperson.
-== A. Creditor’s Remedies Against the Debtor ==
+The ''MDA'' Regulations set out requirements concerning representations made by a motor dealer when offering motor vehicles for sale.  A motor dealer is required to disclose to a prospective buyer whether the motor vehicle was previously used as a taxi, police or emergency vehicle, or for organized racing.  In the case of a new motor vehicle, the motor dealer must disclose whether the vehicle has sustained damage that required repairs worth more than 20 percent of the asking price.  In the case of a used vehicle, the dealer must disclose whether the vehicle has sustained damages requiring repairs of more than $2,000.  The motor dealer is also required to disclose whether a vehicle has previously been used as a lease or rental vehicle and whether a used motor vehicle has been brought into the province specifically for the purposes of sale.
-=== 1. Control by the Creditor ===
+A motor dealer is required to disclose to a prospective consumer whether the odometer accurately reflects the true distance travelled by the  motor vehicle. The ''MDA'' Regulations also set out the required contents of a sale or purchase agreement concerning new vehicles.
-Section 58 provides that where the debtor defaults on a security agreement, the creditor can take control of the collateral item through any method authorised by law with a few select exceptions (s 56). Where, however, the collateral is a consumer good and the debtor has paid two-thirds of the total amount secured, the creditor may not seize the goods without an application to the court (s 58(3)).
+Section 34 of the ''MDA'' prohibits any person from disconnecting or tampering with an odometer. It is also an offence to drive or operate a motor vehicle with a disconnected odometer. Furthermore, it is an offence for any person to alter, disconnect, or replace a motor vehicle’s odometer with the intent to mislead a prospective purchaser about the distance travelled by the motor vehicle. Odometer tampering can  significantly increase the apparent sale value of a motor vehicle and, therefore, the consumer should be wary of representations of low mileage. The ''MDA'' sets out regulatory responses to odometer tampering. The consumer who suffers loss as a result of odometer tampering has a contractual remedy and may be able to present a claim to the Motor Dealer Customer Compensation Fund Board.
-=== 2. Action by the Creditor ===
+== B. Motor Dealer Customer Compensation Fund ==
-A creditor can sue the debtor for breach of contract and seek repayment of the monies owed. Unless the security interest has been taken in consumer goods, the secured party can seize '''and''' sue for any deficiency. When consumer goods form all or merely a portion of the collateral, the secured party must elect to '''seize or sue''', subject to s 58(3).
+An individual who suffers a loss as a result of purchasing a motor vehicle from a registered motor dealer may be entitled to compensation from the Motor Dealer Customer Compensation Fund Board (“the Board”). A consignor of a motor vehicle is also entitled to make an application – on  similar grounds as a purchaser – for compensation for the loss of the consigned vehicle or the value of the vehicle. Individuals who have  purchased a vehicle, primarily for personal or family use, from a registered motor dealer are eligible to apply to the Board for compensation.  Before applying for compensation, the consumer must first make a demand against the motor dealer responsible for the loss. What constitutes an  eligible loss is set out in s 5 of the ''Motor Dealer Customer Compensation Fund Regulation'', BC Reg 102/95 [MDCCFR]. An eligible loss must be a  liquidated amount arising from a trade-in, full payment, deposit or down payment or other liquidated amount in respect of the purchase of a motor vehicle. The cause of the loss must be related to the bankruptcy, insolvency, receivership, dishonest conduct, or failure of the motor dealer to provide clear title.
-=== 3. Acceleration Clauses ===
+Under the ''Motor Dealer Customer Compensation Fund Regulation'' an eligible loss may also arise from the unexpired portion of an extended  warranty so long as it results from the bankruptcy, insolvency, receivership, or other failure of the motor dealer. Claims that will not be compensated include those based upon cost, value or quality, those based on an extended warranty or service if it is recoverable from an insurer, and those related to the portion of the operation of the motor vehicle claimed as a business expense.  For further information about making an application for compensation from the Motor Dealer Customer Compensation Fund, call the Vehicle Sales Authority at (604) 574-5050 or visit http://mvsabc.com/compliance-and-claims/compensation-fund/. A claim against the Fund must be made within two years from the refusal or the motor dealer’s failure to pay for the losses.
-A security agreement provides that a creditor may accelerate payment (or performance) by the debtor if the creditor, in good faith, believes and has commercially reasonable grounds to believe that the prospect of payment or performance is about to be impaired or that the collateral is or is about to be placed in jeopardy (s 16).
-== B. Restrictions on the Creditor’s Right to Dispose ==
-Section 59 provides that a creditor cannot sell the seized goods before the expiration of the 20-day notice period as every party entitled to notice under ss 59(6) or ss 59(10) via approved method outlined in s 72 may redeem the collateral by fulfilling the obligations secured in the security agreement (s 62). Where the collateral is a consumer good, the redeeming party need only pay the amount in arrears (s 62(1)(b)), plus reasonable seizure fees. This is known as the right of re-instatement. It cannot be used more than twice in a 12-month period (s 62(2)).
-== C. Disqualification from “Seize or Sue” Provisions ==
-A party with a security interest in consumer goods may avoid the “seize or sue” restriction where:
-*a) the debtor has engaged in wilful or reckless acts or neglect which have caused substantial damage or deterioration to the goods, and the  secured party may seek a court order pursuant to s 67(9) disqualifying the debtor from the rights and remedies ordinarily available under ss 67(1) - (7); or
-*b) the secured party discovers after seizure that an accession that was collateral has been removed and not replaced by other goods of equivalent value and free from prior security interests; a claim may be advanced against the debtor for the value of the accession (s 67(8)).
-Note: Accession means goods that are installed in or affixed to other goods. For example, a shovel attached to a truck. See s 38 and ss 1(1) for more information about accessions.
-The seizure of consumer goods generally extinguishes the debt in relation to the security agreement.  However, there are exceptions under s 67:
-*If the creditor returns the consumer goods within 20 days after the seizure, that will revive the debt;
-*If the security agreement is a mortgage or an agreement for sale and the consumer goods are part of this security, in the case that the lender exercises their rights under the mortgage or agreement of sale but does not seize the goods, the debt is not extinguished;
-*If the creditor has a purchase money security interest in the seized consumer goods and other consumer goods, the debt is extinguished to the  extent identified in the security instrument as relating to the seized consumer goods.
-These qualifications also apply in the event of a voluntary foreclosure and a voluntary surrender of consumer goods rather than a seizure.
-== D. Third Party Purchaser’s Rights ==
-Under ss 30(3) and 30(4), where a third party purchases collateral in the form of consumer goods worth less than $1,000, and the third party does not  have knowledge of the security agreement between the vendor and the creditor, the third party takes the item free of the creditor’s interest, even if registered. This is known as the “garage sale” defence. The purchaser is known more commonly as a ''bona fide'' purchaser for value without notice.
-The third party’s priority over the creditor ends if there is knowledge of the pre-existing security interest. Under s 1(2), “knowledge” is judged objectively rather than subjectively (i.e. would a reasonable person know?).
-:'''NOTE:''' If the creditor’s interest in the collateral does not continue because the third-party purchaser takes title free of that interest, the creditor’s interest will continue in the proceeds of the sale by the debtor to the purchaser if it is continuously perfected under ss 28(2) or perfected within 15 days under ss 28(3).
-== E. Application of PPSA to Leases ==
-Many consumers lease cars instead of buying on credit under a financing agreement. A lease can qualify as a security agreement: see ''[https://www.canlii.org/en/bc/bcca/doc/2007/2007bcca144/2007bcca144.html?autocompleteStr=Daimler%20chr&autocompletePos=3 DaimlerChrsyler Services Canada Inc. v Cameron]'', 2007 BCCA 144 for factors and ''[https://www.canlii.org/en/bc/bcsc/doc/1995/1995canlii3263/1995canlii3263.html?resultIndex=3 Re Bronson]'', (1995), 34 CBR (3d) 255 (BCSC). Therefore, if they default and the car is repossessed, the “seize or sue” restriction may apply, but the situation is not always clear-cut. LSLAP clients should be referred to a lawyer.
-== F. Bills of Exchange Act ==
-Under Part V of the ''Bills of Exchange Act'' [''BEA''], a bill of exchange or promissory note given for a consumer purchase must be clearly marked “Consumer Purchase” (s 190(1)), and where it is marked, the rights of an assignee of the bill or note are subject to any defence the  purchaser would have against the vendor (s 191). Where it is not marked, it is void except in the hands of a holder in due course without notice (s 190(2)). The purpose of Part V is to codify the rule in ''[https://www.canlii.org/en/on/onca/doc/1962/1962canlii124/1962canlii124.html?resultIndex=1 Federal Discount Corp v St Pierre]'', (1962), 32 DLR (2d) 86.
-Part V does not cover private sales (where the seller is not engaged in the business of selling the goods in question), or sales to small businesses or  corporations of items to be used in their business. Nor does it cover a purchaser’s loan, i.e. a loan from a lender to a person to enable that  person to buy goods and/or services from a seller (subject to s 189(3) below).
-Section 189(1) defines a consumer bill and s 189(2) defines a  consumer note. Under s 189(3), a consumer bill or note is conclusively presumed if:
-#the consideration for its issue was the lending of money, etc. by a person other than a seller, to enable the purchaser to make a consumer purchase; and
-#the seller and the person who lent the money, etc. were, at the time the bill or note was issued, not dealing with each other at arm’s length within the meaning of the ''Income Tax Act''.
-If an instrument meets the definition of a consumer note, any defence that consumer would have for an action against them by the seller would also be available as against subsequent note holders.
-Therefore, if the consumer does not get what they have paid for, that person may not be required to pay the loan back when pressed for payment by the assignee. Also, if the seller does not fulfil obligations under a warranty, the consumer will be able to resist payment.  (See ''Canadian Imperial Bank of Commerce v Geldart'', [1985] BCJ No 1973 and ''Canadian Imperial Bank of Commerce v Kabatoff'', [1986] BCJ No 942)
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Difference between pages "Conditional Sales Contracts and Security Agreements (11:VI)" and "Motor Dealer Act (11:VII)"

Revision as of 22:33, 28 September 2020

A. Overview of the Motor Dealer Act

B. Motor Dealer Customer Compensation Fund

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